Members of the European Parliament’s Committee on the Environment, Public Health and Food Safety (ENVI) were again divided over the European Commission’s proposal to establish a second emissions trading system (ETS2) covering greenhouse gas emissions from space heating and road transport, on Thursday 10 February, when MEP Peter Liese’s (EPP, Germany) draft report on the ETS review was presented.
In his draft report, Mr Liese maintains the idea of a second European carbon market.
However, he proposes to extend its scope to all fuels, in the hope of simplifying the system compared to the Commission’s proposal, while providing for the possibility for Member States to apply for an exemption (until 2027) for fuels used for private road transport and for heating residential buildings (see EUROPE 12867/3).
These proposed changes did not seem to convince the Green/EFA MEPs.
“Instead of the ETS2, we propose to rely on regulatory tools”, responded the group’s shadow rapporteur on this dossier, Michael Bloss (Germany), mentioning the phasing out of internal combustion engines by 2030 and increased funding for energy efficiency.
Also opposed to the ETS2, the shadow rapporteur for the ECR group, Alexandr Vondra (Czech Republic), expressed concern that it would lead to a “huge cost increase for many segments in our society”, while some households and businesses are already struggling with high energy prices.
The shadow rapporteurs for the S&D and Renew Europe groups, Jytte Guteland (Sweden) and Emma Wiesner (Sweden), did not comment on this issue.
However, Tiemo Wölken (Germany), member of the S&D group, said that he is “not convinced by the proposal of the rapporteur as it stands right now”.
“There are reasonable doubts about the effects of the ETS2 in terms of redistribution. It might be regressive”, continued his Socialist colleague Javier López (Spain).
Martin Hojsík (Slovakia), member of the Renew Europe group, admitted to having “concerns” about the issue, while stressing the need to propose alternatives if the ETS2 is rejected.
Although he did not speak during the debate, Pascal Canfin (France), a leading member of the Renew Europe group and Chair of the ENVI committee, repeatedly said that he considers ETS2 to be a mistake by the European Commission. As a compromise, he suggests that it should only apply to companies, through their commercial buildings, and to heavy goods vehicles.
Faced with these criticisms, Mr Liese said that the question of the “social challenge” of climate transition does not depend on whether or not the ETS2 is put in place, as “this challenge is already there” through energy prices.
“Many are against the ETS2 because they think it will have an impact on people, while the ETS1 only has an impact on industry. But it is not true. ETS1 affects average people because it increases the electricity price”, he said.
And to add: “If we say that ETS2 is not a solution, we need to bring other solutions and I honestly don’t see them”.
Other divisions
Besides the ETS2, other proposals are dividing MEPs.
This is particularly the case with the abolition of free emission allowances.
Jytte Guteland wants to speed up the abolition of these measures compared to Peter Liese’s proposal, following the pace proposed by her socialist colleague Mohammed Chahim (Netherlands) in his draft report on the Carbon Border Adjustment Mechanism (CBAM - see EUROPE 12862/3).
Also arguing for acceleration, Michael Bloss said that free allowances should be phased out for sectors such as steel by 2025, and replaced by the CBAM.
Alexandr Vondra, on the other hand, defended maintaining these quotas for the most energy-intensive industries “for as long as possible, at least until CBAM is actually proven to work”.
Another divisive issue is the introduction of a bonus-malus system whereby the number of free allowances given to companies covered by the ETS would vary according to their emissions performance against a sector benchmark.
While Silvia Modig (Finland), shadow rapporteur for The Left, said she could support such a proposal, Mr Bloss said it would lead to additional free allowances and loopholes in the system.
The European Commission expresses its reservations
In defending its original proposal (see EUROPE 12762/1), the European Commission also expressed serious reservations about the changes suggested by Mr Liese, in particular those relating to the ETS2.
“We have assessed the pros and the cons of this all fossil fuels inclusion and our conclusion is that there is an administrative burden and not a lot to be won”, she said of the proposal to broaden the scope of the ETS2.
Furthermore, she claimed that the possibility of an exemption for all private fuels does not represent a “targeted solution” and would result in a severe reduction in revenues from the auctioning of allowances for the Member State that decides to use this exemption.
She also questioned the practical implementation of such an exemption, raising concerns about the risks of irregularities and fraud, as well as the administrative costs for Member States and the entire fuel value chain.
Next steps
The deadline for tabling amendments to the draft report is Wednesday 16 February, with a view to a vote in the ENVI Committee in mid-May and a vote in Parliament’s plenary session in early June.
See the draft report: https://aeur.eu/f/ap (Original version in French by Damien Genicot)